Reagan left office with the Cold War waning and the economy booming. Unemployment had dipped to 5% by 1988. Between 1981 and 1986, gas prices fell from $1.38 per gallon to 95¢. The stock market recovered from the crash, and the Dow Jones Industrial Average—which stood at 950 in 1981—reached 2,239 by the end of Reagan’s second term. Yet, the economic gains of the decade were unequally distributed. The top fifth of households enjoyed rising incomes while the rest stagnated or declined. In constant dollars, annual CEO pay rose from $3 million in 1980 to roughly $12 million during Reagan’s last year in the White House. Between 1985 and 1989 the number of Americans living in poverty remained steady at 33 million. Real per capita money income grew at only 2% per year, a rate roughly equal to the Carter years. The American economy saw more jobs created than lost during the 1980s, but half of the jobs eliminated were in high-paying industries. Furthermore, half of the new jobs failed to pay wages above the poverty line. The economic divide was most acute for African Americans and Latinos, one-third of whom qualified as poor. Trickle-down economics, it seemed, rarely trickled down.

The conservative triumph of the Reagan years proved incomplete. The number of government employees actually increased under Reagan. With more than 80% of the federal budget committed to defense, entitlement programs, and interest on the national debt, the right’s goal of deficit elimination floundered for lack of substantial areas to cut. Between 1980 and 1989 the national debt rose from $914 billion to $2.7 trillion. Despite steep tax cuts for corporations and the wealthy, the overall tax burden of the American public basically remained unchanged. Moreover, so-called regressive taxes on payroll and certain goods increased the tax burden on low- and middle-income Americans. Finally, Reagan slowed but failed to vanquish the five-decade legacy of economic liberalism. Most New Deal and Great Society proved durable. Government still offered its neediest citizens a safety net, if a now continually shrinking one.

Yet the discourse of American politics had irrevocably changed. The preeminence of conservative political ideas grew ever more pronounced, even when as controlled Congress or the White House. Indeed, the Democratic Party adapted its own message in response to the conservative mood of the country. The United States was on a rightward path.

This chapter was edited by Richard Anderson and William J. Schultz, with content contributions by Richard Anderson, Laila Ballout, Marsha Barrett, Seth Bartee, Eladio Bobadilla, Kyle Burke, Andrew Chadwick, Jennifer Donnally, Leif Fredrickson, Kori Graves, Karissa A. Haugeberg, Jonathan Hunt, Stephen Koeth, Colin Reynolds, William J. Schultz, and Daniel Spillman.